The Ideal Capitalist

May 10, 2015

It's impossible to keep up with popular movements today without being bombarded with messages about the immorality of capitalism. It also doesn't help that the worst elements of capitalism brought about the worst financial crisis that today's 20- and 30-somethings can remember.

At the same time, there are two elements of capitalism, at least in its ideal form, that are quite worthy of admiration:

  1. Compatibility with Nature
  2. Devotion to betterment of humanity

Capitalism is compatible with nature because it operates on the same pricinples. It is a survival of the fittest. Of course, whether it is "good" or "bad" is a human judgement. By our human values, we can judge that something that is natural is "bad" or "undesirable" - murder and rape come to mind. However, if we're talking about creating resilient systems - perhaps one we're basing our society on - we'd do well to make compatibility with nature a top priority. We are, after all, products of a "survival of the fittest" environment. We don't behave by human values of "good" or "bad" (or else we wouldn't have them); we behave by what is likely to help us survive and replicate.

Furthermore, our moral code is constantly under flux. Think about our attitude toward murder: today most of us living in the most well-off parts of the world have a no-tolerance policy toward it. One or two centuries ago, killing non-white people (again in the most well-off parts of the world) would've been distasteful but understandable in some situations. Go back another hundred years, and killing certain groups becomes even desirable. The further you go back in time, the more acceptable murder becomes. In a tribe of hunter-gatherers, there is no sanctity of human life, except for your tribe who are likely to be your family.

Our morality morphs depending on the society we find ourselves in. What remains constant is our desire for bettering our own condition, and we're very good at finding out how to do that no matter what kind of society we are in. Capitalism is predicated only on one thing - that individuals are self-interested and therefore that they should be rewarded for generating "value". What value is also depends on the society, but in one form or another, in human societies (and in those of any evolved species) it'll come down to survival or replication. As far as "design assumptions" go, this seems like building on really solid ground. It'd be hard to imagine that one day people will suddenly wake up and not be self-interested.

Secondly, because "value" is defined depending on the situation society finds itself in, motivating individuals to generate more of it (by rewarding them with wealth), means that by proxy the society itself is a system for generating more value, too. When most people hear this, they think of trickle-down economics. This is a confusion of "value" and "wealth". If value is voltage, wealth is current. The Ideal Capitalist tries to create a value differential that makes wealth flow to him. This is put best by a quote from Peter Diamandis: "If you want to become a billionaire, help a billion people." When Mark Zuckerberg helps you connect with your friends and you like his product (pardon the pun), he has generated value that you benefit from. In exchange for that, he is rewarded by society through wealth.

Given this view of "ideal" capitalism, I see bad actors in the system like cancerous cells. Sometimes, you can live with cancerous cells. They might lack the ability to grow enough to be a problem. The other times, it's great to be able to expunge cancerous cells, but when your oncologist tries to put a bullet in your head as a way of killing off the cancer, you start looking for a different oncologist.

This is why I don't understand people on the Left who claim they hate capitalism. I might have more sympathy for them if the 20th century hadn't happened, but as it is, we have already tried to "design" a societal system that removed greed and self-interest from the equation. It didn't work out.

You want to discount capitalism as immoral? Compare living in 1800 to today. Our life-spans are now about as high as our bodies will bear. Technological progress expands our knowledge, but capitalism makes it accessible. Mr. Vanderbilt's railroad made important supplies accessible (not to mention improved knowledge transmission). Mr. Rockefeller's oil kept people warm. The evil food companies generated large amounts of food that feeds an ever growing population, and the evil pharmaceuticals are the same pharmaceuticals that brought penicillin and vaccines out of the labs and to the masses.

If you want to stop evil capitalists, the best solution may not be legistlating. We suck at legislation. What could be worse than a group of non-experts with entirely misplaced incentives trying to fix problems they can't even understand? No, the most effective way to stop capitalists from becoming too powerful or corrupt is to encourage more capitalism and to ensure that our system is purely capitalist - not just a look-alike. Let's take the example of the railroads. In the late 1800s in the United States, nobody could stand up to Cornelius Vanderbilt. His owned the railroads (at least the important ones) and so controlled the US and its economy. His power was not curbed until J.D. Rockefeller decided to circumvent the railroads by shipping oil (the most valuable commodity being shipped by the railroads) through pipelines. Stories of entrepreneurs upending the established order like this is all too common in the history of large entreprises. If government had stepped in to protect the existing order, as they do so often now, they may have legislated something like "All goods must be shipped on licensed railroads" under some guise of protecting the US railroad industry. I'm sure Mr. Vanderbilt would have been in favour.

When we throw government regulation at a problem, the best-case-scenario is that we patch up some issue. We create an incremental improvement over what already existed, perhaps addressing some of the injustice of the existing situation. In practice, we usually create - along with many more problems - an environment that hinders better solutions from flourishing. The Ideal Capitalist doesn't concern himself with individual injustices or tragedies in the world. Those are not an easily addressable market. The Ideal Capitalist changes the scene so the old problems as a category become irrelevant.

Instead, government regulation is most useful to ensure that capitalism can continue unhindered. We need this because not every capitalist is the Ideal Capitalist. Incumbents will try to stifle competition or stop threatening newcomers, just as the established taxi industry has tried to lobby governments to stop Uber. You might think that that is the default, that the Ideal Capitalist is some imaginary character. But in recent times, we've had at least one embodiment of the Ideal Capitalist in Elon Musk, and the culture that permeates in Silicon Valley is increasingly encouraging similar attitudes. But the important thing is that we don't need too many Ideal Capitalists. A few are enough to radically push humanity forward. We just need to make sure we get out of their way.

The problem with capitalism's kind of value generation is that it does not yield itself well to anecdotes. It's easy to hear about how Evil Corp.'s CEO tried to spray the last dodo with oil for fun. It's more difficult to hear anecdotes about how the incentives of capitalism generate value for society in the long term. Even in the realm of universal healthcare, of which I am a huge supporter, it is easy to be upset about Michael Moore's anecdotes about people whose lives were ruined because of their healthcare bills. A more important question might be: how can we speed up fundamental, game-changing health innovations that completely obsolete our health-care problems? These types of innovations don't come often, and it's hard to imagine that they'll come faster with government regulation.

So, while I agree with some leftists that there are evil capitalists, I see the leftist attitude toward capitalism much like the oncologist who kills cancer cells with his pistol. The real issue isn't that capitalism is inherently immoral, it is that we are not purists about our capitalism. If we were, we wouldn't have governments guarantee the survival of companies that have made bad decisions. We also wouldn't have governments enact legislations only to benefit particular corporations. In the ideal scenario, government should only act to ensure the Ideal Capitalist can act freely and without hinderance. Why they can't do that right now is a subject for an entirely different blog post (or volumes of blog posts).

I am well aware that I'm criticising one class of idealists - the leftists with utopian dreams - and proposing another idealistic scenario - one where all capitalists behave like Elon Musk. The difference in my mind is that one framework for running society is built on a solid foundation and another - the utopia where everyone behaves fairly and free of greed - seems more appropriate for a different species.